about the Retained Earnings account is correct? a.Retained Earnings is a permane

Question

about the Retained Earnings account is correct?

a.Retained Earnings is a permanent account; income statement accounts are temporary.

b.Retained Earnings and income statement accounts are all temporary accounts.

c.Retained Earnings and income statement accounts are all permanent accounts.

d.Retained Earnings is a temporary account, while income statement accounts are permanent accounts.

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Explanation / Answer

Answer:

Option A i.e. Retained Earnings is a permanent account, Income Statement are Temporary.

Temporary accounts are the ledger which starts at the beginning of the year with a zero balance and at the end of the year, the balance of these ledgers are transferred to another account. Income Statement accounts are temporary accounts i.e. all the revenue and expenses ledger are temporary account and the balances of these ledger are transferred to Retained Earning account.

Permanent account are the account found in Balance sheet which longs for more than an accounting year such as Assets, Liabilities and Stockholders’ account. The Balance of these account change during the year, but they are not closed with a zero balance at the end of accounting year.

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